Final answer:
If the expected rate of return on investment decreases, the investment schedule will likely shift downward due to lower anticipated profits from investments. Conversely, in the financial market, a rise in the supply of money causes interest rates to decline. The correct option is a. investment schedule will shift downward.
Step-by-step explanation:
If the expected rate of return on investment decreases, the most likely outcome is that the investment schedule will shift downward. When the rate of return decreases, businesses anticipate less profit from investments and as a result, they may reduce the amount of investment. This reduction in investment causes the investment schedule to move downwards because at each level of interest rate, the amount of investment conducted is less than before.
Regarding the changes in the financial market that lead to a decline in interest rates, a rise in supply of money or financial resources typically causes interest rates to fall because it means there is more money available for lending. Conversely, higher interest rates are known to reduce investment spending as it becomes costlier for businesses to borrow money, which can negatively impact aggregate demand (AD) and potentially lead to a recession if AD falls below potential GDP.